They've bought and paid for Congress and the White House. See this, this and this.

Will Americans exercise our power - see this and this - or become serfs to a permanent banking royalty?

An economist says the healthcare bill "is just another bailout of the financial system", and lawyers say that it is unconstitutional.

Will we defeat this giveaway to the insurance giants, or become permanent slaves to mandatory insurance requirements?

Top scientists, economists and environmentalists all say that cap and trade is a scam which won't significantly reduce C02 emissions, and will only help in making the financial players who crashed the economy even more wealthy.

Will we defeat this worthless scam, or allow the failed banks like Goldman Sachs, JP Morgan and Citigroup - who have already taken many billions of taxpayer dollars - to make a fortune off of this con game at our expense?

Will Americans reclaim our nation in 2010 from the thugs and con artists, or put our heads down and stay subservient while the little we have left in the way of money, resources and dignity is stolen by the giant banks, insurance companies and carbon trading players?

James Hansen - the world's leading climate scientist fighting against global warming - told Amy Goodman this morning that cap and trade not only won't reduce emissions, it may actually increase them:

The problem is that the emissions just go someplace else. That’s what happened after Kyoto, and that’s what would happen again, if—as long as fossil fuels are the cheapest energy, they will be burned someplace. You know, the Europeans thought they actually reduced their emissions after Kyoto, but what happened was the products that had been made in their countries began to be made in other countries, which were burning the cheapest form of fossil fuel, so the total emissions actually increased...

I’ve talked with many economists, and the majority of them agree that the cap and trade with offsets is not the way to address the problem.

As I have previously pointed out:

The economists who invented cap-and-trade say that it won't work for global warming

European criminal investigators have determined that there is a tremendous amount of fraud occurring in the carbon trading market. Indeed, organized crime has largely taken over the European cap and trade market.

Former U.S. Undersecretary of Commerce for Economic Affairs Robert Shapiro says that the proposed cap and trade law "has no provisions to prevent insider trading by utilities and energy companies or a financial meltdown from speculators trading frantically in the permits and their derivatives."

Our bailout buddies over at Goldman Sachs, JP Morgan, Morgan Stanley, Citigroup and the other Wall Street behemoths are buying heavily into carbon trading (see this, this, this, this, this and this). As University of Maryland professor economics professor and former Chief Economist at the U.S. International Trade Commission Peter Morici writes:

Obama must ensure that the banks use the trillions of dollars in federal bailout assistance to renegotiate mortgages and make new loans to worthy homebuyers and businesses. Obama must make certain that banks do not continue to squander federal largess by padding executive bonuses, acquiring other banks and pursuing new high-return, high-risk lines of businesses in merger activity, carbon trading and complex derivatives. Industry leaders like Citigroup have announced plans to move in those directions. Many of these bankers enjoyed influence in and contributed generously to the Obama campaign. Now it remains to be seen if a President Obama can stand up to these same bankers and persuade or compel them to act responsibly.

In other words, the same companies that made billions off of derivatives and other scams and are now getting bailed out on your dime are going to make billions from carbon trading.

One the largest boosters for cap and trade invented credit default swaps - which were supposed to increase financial stability, but instead were a large part of the reason that the world economy crashed last year

Behind the scenes, strategic security relations between the two countries are flourishing. Israeli officials have been singing the praises of President Obama for his willingness to address their defense concerns and for actions taken by his administration to bolster Israel’s qualitative military edge -- an edge eroded, according to Israel, during the final year of the George W. Bush presidency.

Among the new initiatives taken by the administration, the Forward has learned, are adjustments in a massive arms deal the Bush administration made with Arab Gulf states in response to Israeli concerns. There have also been upgrades in U.S.-Israeli military cooperation on missile defense. And a deal is expected next year that will see one of the United States’ most advanced fighter jets go to Israel with some of America’s most sensitive new technology.

Amid the cacophony of U.S.-Israel clashes on the diplomatic front, public attention given to this intensified strategic cooperation has been scant. But in a rare public comment in October, Israeli Ambassador Michael Oren praised the Obama administration’s response to complaints about lost ground during the close of the Bush years as "warm and immediate."

"We came to the Obama administration and said, ‘Listen, we have a problem here,'" Oren, told a gathering of the National Jewish Democratic Council. "The administration’s reaction was immediate: we are going to address this issue, we are going to make sure that we maintain your QME [qualitative military edge]."

All of this is being done pursuant to this:

America’s commitment to maintaining Israel’s qualitative military edge was codified directly into U.S. law via 2008 legislation backed by AIPAC. This legislation requires the president to report to Congress periodically on actions taken by the administration to ensure Israel’s advantage.

I have to confess that I didn't realize that a law was enacted last year making it a legal requirement for America to maintain "Israel’s qualitative military edge," and -- even more amazingly -- that the President of the U.S. is required to report regularly to the U.S. Congress on the steps he's taking to ensure Israel's superiority. That's a rather extraordinary law, and the administration seems to be fulfilling its requirements faithfully.

Update: We tracked down the actual law, 22 USC Sec. 2776, and it appears to mainly be focused on exports of military equipment and services by the U.S.:

ASSESSMENT OF ISRAEL'S QUALITATIVE MILITARY EDGE OVER MILITARY THREATS

"(a) Assessment Required. - The President shall carry out an empirical and qualitative assessment on an ongoing basis of the extent to which Israel possesses a qualitative military edge over military threats to Israel. The assessment required under this subsection shall be sufficiently robust so as to facilitate comparability of data over concurrent years.

"(b) Use of Assessment. - The President shall ensure that the assessment required under subsection (a) is used to inform the review by the United States of applications to sell defense articles and defense services under the Arms Export Control Act (22U.S.C. 2751 et seq.) to countries in the Middle East.

"(c) Reports. -

"(1) Initial report. - Not later than June 30, 2009, the President shall transmit to the appropriate congressional committees a report on the initial assessment required under subsection (a).

"(2) Quadrennial report. - Not later than four years after the date on which the President transmits the initial report under paragraph (1), and every four years thereafter, the President shall transmit to the appropriate congressional committees a report on the most recent assessment required under subsection (a).

"(d) Certification. - [Amended this section.]

"(e) Definitions. - In this section:

"(1) Appropriate congressional committees. - The term 'appropriate congressional committees' means the Committee on Foreign Affairs of the House of Representatives and the Committee on Foreign Relations of the Senate.

"(2) Qualitative military edge. - The term 'qualitative military edge' has the meaning given the term in section 36(h) of the Arms Export Control Act, as added by subsection (d) of this section [22 U.S.C. 2776(h)]."

Basically what this says is "Review Israel's military strength every 4 years, and don't sell the Arabs anything that is better than or the same as what Israel has". The requirement that arms exports to Arab countries be certified as not "being on par with Israel" is elsewhere in this part of the United States Code. The report basically sets a benchmark for what Israel's technical capabilities are, so we know what we can and cannot sell to the Arabs.

Credit unions are regulated by the National Credit Union Administration, or NCUA, or by state agencies. The NCUA oversees the safety and soundness of all credit unions.

If you want to check up on your credit union, make sure it's federally insured by the NCUA and look at its finances, you can do that any time. Go to the NCUA's website at www.ncua.gov, click on the "Credit Union Data" link on the left-hand side of the page below where it says Data and Services. Next, click on the Find a Credit Union link, type in the credit union's name and click the Find button.

You can then choose to view the Financial Performance Report or the official regulatory document, called the 5300 report. This report will tell you how well capitalized the credit union is and even let you see how many of the loans are going bad.

What about your asset protection? Credit unions are backed by the NCUA, through the NCU Share Insurance Fund, which is backed by the U.S. government. Individual accounts are backed up to $100,000, with additional coverage up to $250,000 for certain retirement accounts. Joint accounts may qualify for coverage of up to $200,000.

And since the "war on terror" is now being expanded to Yemen, it is worth remembering that experts state that the "war on terror" has been counterproductive for keeping us safe. For example, a leading advisor to the U.S. military, the hawkish Rand Corporation, released a study in 2008 called "How Terrorist Groups End: Lessons for Countering al Qa'ida".

The report confirms what experts have been saying for years: the war on terror is actually weakening national security (see this, this and this).

Indeed, while the 9-11 Commission made numerous recommendations on how to prevent future terrorist attacks -- many of them simple and inexpensive to implement -- the Bush administration failed to do so (and see this and this). Moreover, the Bush administration and its allies actively blocked efforts to do so.

Things haven't improved much - at least in some areas - since Obama has taken office.

Torture Is Stupid

And, purportedly, some are again pushing torture in response to the underwear bomber.

As president-elect of Psychologists for Social Responsibility, Roy Eidelson, points out - most Americans supported the use of torture because they were deceived into thinking that it works and was a necessary tool in a life-or-death war on terror.

Terrorism is not now, and has never been, an existential threat to the United States. As we’ve discussed, the threat of dying in a terrorist attack is far smaller than the threat of being hit by lightning. No one’s arguing we shouldn’t be vigilant against terrorism — and airline security in particular is a farce, a problem that must be solved, and (frustratingly enough) a problem that can be solved. As is the problem we seem to have of keeping people — even people who’ve been flagged by their own families — on the proper watch lists. But these are law-enforcement problems and intelligence problems. They are not a war.

The war is in our minds, between being scared of our shadows and keeping the true threat in perspective. It’s not easy of course — I’m a New Yorker, every day I get on a subway that could be bombed, that rumbles under what used to be the World Trade Center. But is there any true solution other than to keep a stiff upper lip?

Fear is a powerful weapon — and there’s no reason the American president should act as a force multiplier for Al Qaeda.

To terrorize and destabilize, terrorists need publicity and our complicity. With publicity, even failed terrorist acts succeed in terrorizing; without publicity, terrorism would fade away ... By amplifying and connecting relatively sporadic terrorist acts into a generalized "war," the somewhat marginal phenomenon of terrorism has become a primary preoccupation of our government and people. This transformation puts the lie to the constant refrain by our same leaders that "terrorists will gain nothing."

Have we learned anything from the revelations that the Bush administration lied us into the need for a war in Iraq, lied about the need for torture, lied about the reason for spying, loss of constitutional rights, and an overwhelmingly powerful executive branch?

Have we learned anything from the discovery that unnecessary war, torture and panic over sporadic terrorist attacks create more terrorism and reduce national security?

Or will our fear of the underwear bomber and other terrorist acts scare us into stupidity again, as it did so many people during the Bush years?

Here’s the opportunity, Wall Street’s newest and bestest gamble: there is a huge untapped market of some 50 million people who are not paying insurance premiums—and the number grows every year because employers drop coverage and people can’t afford premiums. Solution? Health insurance “reform” that requires everyone to turn over their pay to Wall Street. Can’t afford the premiums? That is OK—Uncle Sam will kick in a few hundred billion to help out the insurers. Of course, do not expect more health care or better health outcomes because that has nothing to do with “reform” ... Wall Street’s insurers... see a missed opportunity. They’ll collect the extra premiums and deny the claims. This is just another bailout of the financial system, because the tens of trillions of dollars already committed are not nearly enough.

Wray points out that - with the repeal of Glass Steagall - the financial sector and the insurance businesses (the "f" and "i" in the "fire" sector) are somewhat merged.

Wray is no conservative. He is Ph.D. is Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute - which focuses on inequality in the distribution of earnings, income, and wealth.

Dr. Andrew Coates describes the bill as "a guarantee of insurance industry dominance and the continued privatization of health care in every arena.”

Dr. Coates is no conservative. He is a medical doctor, a member of the Public Employees Federation, AFL-CIO, secretary of the Capital District chapter of Physicians for a National Health Program, and teaches at Albany Medical College.

Now Huffington Post - one of the world's most popular news services - has taken up the call.

Today, HuffPost urged people to move their money to community banks, and announced::

An agreement with top financial analysts Chris Whalen and Dennis Santiago, who gave us access to their IRA (Institutional Risk Analytics) database. Using this tool, everyone will be able to plug in their zip code and quickly get a list of the small, solvent Main Street banks operating in their community.

The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it's meant to be. It's neither Left nor Right -- it's populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest. It's time for Americans to move their money out of these reckless behemoths. And you don't have to worry, there is zero risk: deposit insurance is just as good at small banks -- and unlike the big banks they don't provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion.

Think of the message it will send to Wall Street -- and to the White House. That we have had enough of the high-flying, no-limits-casino banking culture that continues to dominate Wall Street and Capitol Hill. That we won't wait on Washington to act, because we know that Washington has, in fact, been a part of the problem from the start. We simply can't count on Congress to fix things. We have to do it ourselves -- and the big banks are the core of the problem. We need to return to the stable, reliable, people-oriented approach of America's community banks.

So watch Eugene's amazing video, then go to www.moveyourmoney.info to learn more about how easy it is to move your money. And pass the idea on to your friends (help make this video -- and this idea -- go viral!).

JP Morgan/Chase, Citi, Wells Fargo, and Bank of America may be "too big to fail" -- but they are not too big to feel the impact of hundreds of thousands of people taking action to change a broken financial and political system. Let them gamble with their own money, not yours. Let's turn big banks into smaller banks. We'll all be better off -- and safer -- as a result.

Make it your New Year's resolution to move your money. We can't think of a better way to start 2010.

Find a community bank near you by typing in your zip code at MoveYourMoney.info. Find a credit union near you here.

Note 1: Martin Weiss periodically releases lists of the weakest and strongest banks, although I cannot vouch for the accuracy of his ratings.

Note 2: I have also previously called for people to protest in Washington on January 9th. But it will be too cold, so I will defer to others to organize protests at the appropriate time(s).

Barton Biggs and Marc Faber think that investors should move out of bonds and back into stocks.

On the other hand, the chief executive officer of bond giant Pimco - Mohamed El-Erian - says that most financial managers, investment officers and economists are erroneously assuming this will be a V-shaped recovery because they are "fighting the last war" instead of looking at what is really happening in the economy:

El-Erian says many of the bulls don't appreciate just how much the government props still under the economy are masking its weakness. Instead of focusing on the fundamentals today, he says, they're looking to the past, expecting a quick economic rebound because that's what's happened before.

We're trained to think the "farther you fall, the higher you'll bounce back," El-Erian says. "We're hostage to the V."

El-Erian says that the economy is on a "sugar high" and its growth, fueled by government intervention, is "unsustainable".

Of course, not all past recessions were followed by a v-shape recovery. For example:

As you can see, the 1929 crash was actually very small compared to the "second leg down" crash which didn't end until 1932 or 1933.

While El-Erian thinks we've probably seen the worst of the crisis, he thinks that investors will again become scared and move into treasuries. Analysts like Mish think that we could very well have a W- WW- or L-shaped recovery over a period of many years, rather than a quick V-shaped recovery.

Of course, the sovereign default of a large economy could change everything.

U.S. intelligence has concluded that the document published recently by the Times of London, which purportedly describes an Iranian plan to do experiments on what the newspaper described as a "neutron initiator" for an atomic weapon, is a fabrication.

Like the Nigerian "yellow cake" forgery, U.S. intelligence had to have known the Iranian document was a forgery, and yet failed to debunk either. Indeed, as Time points out, the yellow cake document:

had been checked out — and debunked — by U.S. intelligence a year before the President repeated it.

Indeed, a claim that Iran is trying to buy uranium is now being made against Iran, just as it was with Iraq. Specifically, Associated Press - citing unnamed "diplomats" from an unnamed country - is reporting today that Iran is trying to obtain uranium. However, Iran says that it has 1,400 uranium mines (a senior IAEA official was allowed to visit one of the mines in 1992) - so why would Iran need to purchase more uranium from another country?

The parallels go even further, since war against both countries were planned many years ago. Specifically:

And false linkages between terrorists and both countries are be (or may still be) made. Specifically:

A knowingly false linkage was made between Al Qaeda and Iraq, and - while most people forget this fact - that false linkage formed one of the main justifications for the war in Iraq

U.S. congressman Ron Paul stated that the government "is determined to have martial law", and that the government is hoping to get the people "fearful enough that they will accept the man on the white horse". He also said "a contrived Gulf of Tonkin-type incident may occur to gain popular support for an attack on Iran".

And former National Security Adviser Zbigniew Brzezinski told the Senate that a terrorist act might be carried out in the U.S. and falsely blamed on Iran to justify war against that nation. He also told the Senate that the war on terror is "a mythical historical narrative".

Disclaimer: I don't like the Iranian Mullahs - I think they are fundamentalist fanatics, and the violence against protesters is barbaric. I also didn't like Saddam Hussein, as he was a ruthless tyrant.

But there is a little difference between not liking someone and sending American boys and girls overseas to be killed in an unnecessary war.

Yemeni crude oil exports decreased to $1.5 billion during the fiscal period from January –October of 2009, compared with $4.2 billion during the same period of 2008, a decrease of $2.7 billion, the Central Bank of Yemen reported.

In a result that may have implications for financial regulation, researchers from computer science and economics have revealed potentially impenetrable problems with the pricing of financial derivatives. They show that sellers of these investments could purposefully include pieces of bad risk that no buyer could detect even with the most powerful computers.

The research focused on collateralized debt obligations, or CDOs, an investment tool that combines many mortgages with the promise of spreading out and lowering the risk of default. The team examined what would happen if a sellerknew that some mortgages were "lemons" and structured a package of CDOsto benefit himself. They found that the manipulation may be impossiblefor buyers to detect either at time of sale or later when the derivative loses money.

It is now standard wisdom that a major culprit in the 2008 financial meltdown was use of simplistic mathematical models of risk at financial firms. This paper,released as a working draft Oct. 15, suggests that the problems may go deeper.

"We are cautioning that even if you have the right model it's not easy to price derivatives," Arora said. "Making the models more complicated will not make these effects go away, even for computationally sophisticated."

Arora noted that the problem arises from asymmetric information between buyers and sellers, and goes against conventional wisdom in economic theory, which holds that derivatives reduce the negative effects of such unequal information.

"Standard economics emphasizes that securitization can mitigate the cost ofasymmetric information," Brunnermeier said. "We stress that certain derivative securities introduce additional complexity and thus a new layer of asymmetric information that can be so severe it overturns the initial advantage."

Brunnermeier noted that the finding came from combining computer science and finance, which has not been done before but has the potential for further insights. “I anticipate that both fields can enrich each other,” he said.

Both progressives and conservatives question the constitutionality of the healthcare bill. Specifically, people from across the aisle say that the government cannot force people to buy private health insurance.

Wednesday, December 23, 2009

Call or write your Congressional and Senate representatives and tell them that you're joining the following people in demanding that all of AIG's emails to be made public, so that we can gain insight into what really caused the financial crisis:

William K. Black, Associate Professor of Economics and Law at the University of Missouri – Kansas City, and the former head S&L regulator

On December 1st, President Obama talked about withdrawing U.S. troops from Afghanistan within 18 months.

Everyone now knows that there is no firm withdrawal date from Afghanistan. See this and this.

But in testimony to the Senate Armed Services Committee on December 2nd, Secretary of State Hillary Clinton actually gave a much longer horizon for the presence of U.S. troops in America:

Senator UDALL.— So, in an ideal world, we would get the job done militarily in the short term; in the medium and long term, we would have a presence in the region, economically, diplomacy, and politically.

Secretary CLINTON. Well, as we have with so many other countries— obviously, we have troops in a limited number of countries around the world; some have been there for 50, 60 years, but we have long-term economic assistance and development programs in many others. And we think that’s a likely outcome in both Afghanistan and Pakistan, that we would be there with a long-term commitment.

Does this mean that U.S. troops will be in Afghanistan in 50 year?

On the surface, Clinton's statement could be interpreted to mean that troops will leave sooner, but that America will have long-term economic assistance and development programs in Afghanistan for many decades to come.

However, U.S. charities working in Afghanistan report that they are subject to Pentagon sponsorship and control, and so the Afghani people view them as part of the U.S. military (which hampers their aid work).

Therefore, whether or not troops will remain in Afghanistan for a half century or more, the Afghani people and the rest of the world may consider it a permanent occupation.

Remember also that - while the U.S. government has promised to withdraw by December 31, 2011 from Iraq - the U.S. is building numerous permanent military bases in that country. (see this, this, this, this, this, this, this, this, this, and this). So talk is cheap.

Moore said that newspapers, bought up by corporations in the last generation, have pursued profits at the expense of news gathering. By basing their businesses on advertising over circulation, newspaper owners have neglected their true economic base and core constituency, he said...

And Moore cited newspapers like those in Baltimore or Detroit, his home town, with firing reporters that cover subjects that affect the community.

Ultimately, he said, this was self-defeating. It would be like GM deciding to discourage people from learning how to drive, he said.

I don't buy all the hype that the internet is even the primary culprit of the demise of journalism. The primary culprit is the same as it is all over the country, in every industry and in government: equity extraction.

Let me explain, in short: when executives expect unrealistic profits of 20% and higher per annum on businesses something has got to give. It's an unnatural and unsustainable growth rate. For the first ten or so years of a small to medium size company's life? Sure. But when you are 3M, or GE? Unrealistic and ultimately impossible.

So, when such rates cannot be achieved by organic growth in the business, executives start shaving off perceived fat and before they know it they're cutting off the muscle and then shaving off bone chips. And when they've gotten to the bone chips they borrow other people's money to buy new companies, load up those companies with debt and extract equity form them and then because it looks like the parent is still growing award themselves huge bonuses. It's a shell game.

That is what has happened to the news industry in America. The excessive obsession with unnaturally high profits has led to a vicious circle of cutting budgets, providing less services, which is then followed by even more drastic cuts. The local San Antonio paper is a great example of this. Twenty years ago there were two large dailies in my hometown. Both competed with each other for real scoops. Both had book reviews by local writers, providing local jobs. Both covered the local arts and sports scene. Both covered local politics in depth and local and state news in depth. Both had vigorous investigative teams. Both had bureaus in Mexico and both had offices and reporters on the ground in DC.

And then corner offices of Gannet and Harte-Hanks were populated with Kinsey-esque managers and the rout was on ... So, today, San Antonio has one daily that is as flimsy and tiny as the local alternative ... And 80% of this happened before ... the internet. All in the name of higher industry profits--not some overwhelming fear of the world wide inter-tubes. So, who's profiting? Certainly not the intellectual vigor of the locals? And certainly not the writers who are all now 'journalism entreprenuers.' The only people who profited are the executives who obsessed over profits, to lard up their own bonus pool ...

You can provide a public service with small profits for a long, long time, but if you demand large ones you will destroy it. Just ask the big banks.

But the newspapers have largely driven themselves into the ground with their never-ending drive for higher profits, which led to a reduction in news bureaus, investigation and real reporting, and an increase in reliance on government and corporate press releases.

The newspapers made a speculative gamble that reducing real reporting and replacing it with puff pieces would increase its profits, just as the giant banks made speculative gambles on subprime mortgages, derivatives, and other junk, and largely abandoned the boring, traditional business of depository banking.

Bailing out these newspapers would be a form of moral hazard equivalent to bailing out the giant banks. Instead, we should let the bad gamblers lose, and make room for companies that will actually serve a public need.

This image gives a sense of the decline in diversity in media ownership over the last couple of decades:

If traditional newspaper companies are bailed out, they will be encouraged to continue their business-as-usual, and new, fresh media voices will face a handicap to competition (just as the small banks are now unable to compete fairly against the too big to fails).

We need more real reporting in this country, not less. Bailing out the traditional media will create more consolidation, just as it has in the banking industry.

I am concerned that if the direction of the news is all blogosphere, all opinions, with no serious fact-checking, no serious attempts to put stories in context, that what you will end up getting is people shouting at each other across the void but not a lot of mutual understanding.

But as Dan Rather pointed out in July, the quality of journalism in the mainstream media has eroded considerably, and news has been corporatized, politicized, and trivialized...

By definition, establishments believe in propping up the existing order. Members of the ruling class have a vested interest in keeping things pretty much the way they are. Safeguarding the status quo, protecting traditional institutions, can be healthy and useful, stabilizing and reassuring....

"If you are of the establishment persuasion (and I am). . . ."

So traditional newspapers are also losing readers to the extent they are writing puff pieces instead of writing the kinds of things people want to read: hard-hitting stories about what is going on in the country and the world.

Finally, as I wrote in March, the whole Internet-versus-traditional-media discussion misses the deeper truth:

The whole debate about blogs versus mainstream media is nonsense.

In fact, many of the world's top PhD economics professors and financial advisors have their own blogs...

The same is true in every other field: politics, science, history, international relations, etc.

So what is "news"? What the largest newspapers choose to cover? Or what various leading experts are saying - and oftentimes heatedly debating one against the other?

The popularity of some reliable internet news sources are growing by leaps and bounds. For example, web news sources which run hard-hitting investigative news stories on the economy - and do not simply defer to Bernanke, Geithner, Summers and other people "of the establishment persuasion" - are gaining more and more readers.

It is not because it is some new, flashy media. It's because people want to know what is going on ... and some of the best reporting can now be found on the web.

Subtle, Unintentional Propaganda?

If there are bailouts of the newspaper industry, will the government take ownership of the media corporations, as it has in AIG and some of the giant banks?

Will that - in turn - lead to a situation in which the government representatives subtly and innocently censors anti-government stories? After all, the object of criticism might be the employer or friend of the government representatives on the newspaper board.

Indeed, the most cynical view is that this could eventually open the door to Pravda-style government control of media.

Monday, December 21, 2009

As I have repeatedly noted, mainstream economists and financial advisors have been using faulty and unrealistic models for years. See this, this, this, this, this and this.

And I have pointed out numerous times that economists and advisors have a financial incentive to use faulty models. For example, I pointed out last month:

The decision to use faulty models was an economic and political choice, because it benefited the economists and those who hired them.

For example, the elites get wealthy during booms and they get wealthy during busts. Therefore, the boom-and-bust cycle benefits them enormously, as they can trade both ways.

Specifically, as Simon Johnson, William K. Black and others point out, the big boys make bucketloads of money during the booms using fraudulent schemes and knowing that many borrowers will default. Then, during the bust, they know the government will bail them out, and they will be able to buy up competitors for cheap and consolidate power. They may also bet against the same products they are selling during the boom (more here), knowing that they'll make a killing when it busts.

But economists have pretended there is no such thing as a bubble. Indeed, BIS slammed the Fed and other central banks for blowing bubbles and then using "gimmicks and palliatives" afterwards.

It is not like economists weren't warning about booms and busts. Nobel prize winner Hayek and others were, but were ignored because it was "inconvenient" to discuss this "impolite" issue.

Likewise, the entire Federal Reserve model is faulty, benefiting the banks themselves but not the public.

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."

The problems of a massive debt overhang were also thoroughly documented by Minsky, but mainstream economists pretended that debt doesn't matter.

And - even now - mainstream economists are STILL willfully ignoring things like massive leverage, hoping that the economy can be pumped back up to super-leveraged house-of-cards levels.

As the Wall Street Journal article notes:

As they did in the two revolutions in economic thought of the past century, economists are rediscovering relevant work.

It is only "rediscovered" because it was out of favor, and it was only out of favor because it was seen as unnecessarily crimping profits by, for example, arguing for more moderation during boom times.

The powers-that-be do not like economists who say "Boys, if you don't slow down, that bubble is going to get too big and pop right in your face". They don't want to hear that they can't make endless money using crazy levels of leverage and 30-to-1 levels of fractional reserve banking, and credit derivatives. And of course, they don't want to hear that the Federal Reserve is a big part of the problem.

Indeed, the Journal and the economists it quotes seem to be in no hurry whatsoever to change things:

The quest is bringing financial economists -- long viewed by some as a curiosity mostly relevant to Wall Street -- together with macroeconomists. Some believe a viable solution will emerge within a couple of years; others say it could take decades.

I think that the question that needs to be asked is how the discipline was untracked and trivialized from its classical flowering? How did it become marginalized and trivialized, taking for granted the social structures and dynamics that should be the substance and focal point of its analysis?...

To answer this question, my book describes the "intellectual engineering" that has turned the economics discipline into a public relations exercise for the rentier classes criticized by the classical economists: landlords, bankers and monopolists. It was largely to counter criticisms of their unearned income and wealth, after all, that the post-classical reaction aimed to limit the conceptual "toolbox" of economists to become so unrealistic, narrow-minded and self-serving to the status quo. It has ended up as an intellectual ploy to distract attention away from the financial and property dynamics that are polarizing our world between debtors and creditors, property owners and renters, while steering politics from democracy to oligarchy...

[As one Nobel prize winning economist stated,] "In pointing out the consequences of a set of abstract assumptions, one need not be committed unduly as to the relation between reality and these assumptions."

This attitude did not deter him from drawing policy conclusions affecting the material world in which real people live. These conclusions are diametrically opposed to the empirically successful protectionism by which Britain, the United States and Germany rose to industrial supremacy.

Typical of this now widespread attitude is the textbook Microeconomics by William Vickery, winner of the 1997 Nobel Economics Prize:

"Economic theory proper, indeed, is nothing more than a system of logical relations between certain sets of assumptions and the conclusions derived from them... The validity of a theory proper does not depend on the correspondence or lack of it between the assumptions of the theory or its conclusions and observations in the real world. A theory as an internally consistent system is valid if the conclusions follow logically from its premises, and the fact that neither the premises nor theconclusions correspond to reality may show that the theory is not very useful, but does not invalidate it. In any pure theory, all propositions are essentially tautological, in the sense that the results are implicit in the assumptions made."

Such disdain for empirical verification is not found in the physical sciences. Its popularity in the social sciences is sponsored by vested interests. There is always self-interest behind methodological madness. That is because success requires heavy subsidies from special interests, who benefit from an erroneous, misleading or deceptive economic logic. Why promote unrealistic abstractions, after all, if not to distract attention from reforms aimed at creating rules that oblige people actually to earn their income rather than simply extracting it from the rest of the economy?

As I have previously written, mainstream economists and financial advisors who promote flawed models are not necessarily bad people:

I am not necessarily saying that mainstream economists were intentionally wrong, or that they lied because it led to promotions or pleased their Wall Street, Fed or academic bosses.

But it is harder to fight the current and swim upstream then to go with the flow, and with so many rewards for doing so, there is a strong unconscious bias towards believing the prevailing myths. Just like regulators who are too close to their wards often come to adopt their views, many economists suffered "intellectual capture" by being too closely allied with Wall Street and the Fed.

As Upton Sinclair said:

It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

By every measure, the Pentagon is the largest institutional user of petroleum products and energy in general. Yet the Pentagon has a blanket exemption in all international climate agreements.

***

The Feb. 17, 2007, Energy Bulletin detailed the oil consumption just for the Pentagon's aircraft, ships, ground vehicles and facilities that made it the single-largest oil consumer in the world.

***

Even according to rankings in the 2006 CIA World Factbook, only 35 countries (out of 210 in the world) consume more oil per day than the Pentagon.

***

This information is not readily available ... because military emissions abroad are exempt from national reporting requirements under U.S. law and the U.N. Framework Convention on Climate Change" ...

Bryan Farrell in his new book, "The Green Zone: The Environmental Costs of Militarism," says that "the greatest single assault on the environment, on all of us around the globe, comes from one agency ... the Armed Forces of the United States."

Just how did the Pentagon come to be exempt from climate agreements? At the time of the Kyoto Accords negotiations, the U.S. demanded as a provision of signing that all of its military operations worldwide and all operations it participates in with the U.N. and/or NATO be completely exempted from measurement or reductions.

After securing this gigantic concession, the Bush administration then refused to sign the accords.

***

Although the U.S. had already received these assurances in the negotiations, the U.S. Congress passed an explicit provision guaranteeing U.S. military exemption. Inter Press Service reported on May 21, 1998: "U.S. law makers, in the latest blow to international efforts to halt global warming, today exempted U.S. military operations from the Kyoto agreement which lays out binding commitments to reduce 'greenhouse gas' emissions. The House of Representatives passed an amendment to next year's military authorization bill that 'prohibits the restriction of armed forces under the Kyoto Protocol.'"

***

According to environmental journalist Johanna Peace ... "The military accounts for a full 80 percent of the federal government's energy demand."

Sixteen gallons of oil. That's how much the average American soldier in Iraq and Afghanistan consumes on a daily basis -- either directly, through the use of Humvees, tanks, trucks, and helicopters, or indirectly, by calling in air strikes. Multiply this figure by 162,000 soldiers in Iraq, 24,000 in Afghanistan, and 30,000 in the surrounding region (including sailors aboard U.S. warships in the Persian Gulf) and you arrive at approximately 3.5 million gallons of oil: the daily petroleum tab for U.S. combat operations in the Middle East war zone.

The [Iraq] war is responsible for at least 141 million metric tons of carbon dioxide equivalent (MMTCO2e) since March 2003. To put this in perspective, CO2 released by the war to date equals the emissions from putting 25 million more cars on the road in the US this year.

Between March 2003 and October 2007 the US military in Iraq purchased more than 4 billion gallons of fuel from the Defense Energy Support Center, the agency responsible for procuring and supplying petroleum products to the Department of Defense. Burning these fuels has directly produced nearly 39 million metric tons of CO2 Just transporting 4 billion gallons of fuel to the military in Iraq consumed at least as much fuel as was delivered nearly doubling overall fuel-related emissions.

Emissions from the Iraq War to date are nearly two and a half times greater than what would be avoided between 2009 and 2016 were California to implement the auto emission regulations it has proposed (but that the Bush Administration struck down).

If the war were ranked as a country in terms of annual emissions, it would emit more CO2 each year than 139 of the world’s nations do, more than 60% of all countries on the planet...

Of course, the escalation of the war in Afghanistan will lead to a huge surge in greenhouse gas emissions as well.

The fact that the U.S. military is one of the world's largest sources of C02 is an open secret that no one is addressing. If C02 causes warming and the military is one of the largest producers of C02, then any talk of climate change which does not include the military is nothing but hot air.

Sunday, December 20, 2009

Congress and the White House may have been co-opted by the big lobbyists and Wall Street insiders, but you may assume that at least the third branch of government - the courts - are still following the rule of law and protecting the little guy.

Unfortunately, the American system of justice is also under attack.

I'm not talking simply about judicial corruption. True, as I pointed out on February 17, 2009:

The New York Times is providing important coverage of the U.S. Supreme Court's May 18, 2009 decision in the case known as Ashcroft v. Iqbal:

The lower courts have certainly understood the significance of the decision, Ashcroft v. Iqbal, which makes it much easier for judges to dismiss civil lawsuits right after they are filed. They have cited it more than 500 times in just the last two months.

“Iqbal is the most significant Supreme Court decision in a decade for day-to-day litigation in the federal courts,” said Thomas C. Goldstein, an appellate lawyer with Akin Gump Strauss Hauer & Feld in Washington.

Why is Iqbal such an important case?

As the Times notes:

For more than half a century, it has been clear that all a plaintiff had to do to start a lawsuit was to file what the rules call “a short and plain statement of the claim” in a document called a complaint. Having filed such a bare-bones complaint, plaintiffs were entitled to force defendants to open their files and submit to questioning under oath.

This approach, particularly when coupled with the American requirement that each side pay its own lawyers no matter who wins, gave plaintiffs settlement leverage. Just by filing a lawsuit, a plaintiff could subject a defendant to great cost and inconvenience in the pre-trial fact-finding process called discovery...

Information about wrongdoing is often secret. Plaintiffs claiming they were the victims of employment discrimination, a defective product, an antitrust conspiracy or a policy of harsh treatment in detention may not know exactly who harmed them and how before filing suit. But plaintiffs can learn valuable information during discovery.

The Iqbal decision now requires plaintiffs to come forward with concrete facts at the outset, and it instructs lower court judges to dismiss lawsuits that strike them as implausible.

“Determining whether a complaint states a plausible claim for relief,” Justice Anthony M. Kennedy wrote for the five-justice majority, “requires the reviewing court to draw on its judicial experience and common sense.”

Note those words: Plausible. Common sense.

So what is the real world effect of the Supreme Court's decision?

The Times provides some hints:

“It obviously licenses highly subjective judgments,” said Stephen B. Burbank, an authority on civil procedure at the University of Pennsylvania Law School. “This is a blank check for federal judges to get rid of cases they disfavor.”

Courts applying Iqbal have been busy. A federal judge in Connecticut dismissed a disability discrimination suit this month, saying that Iqbal required her to treat the plaintiff’s assertions as implausible. A few days later, the federal appeals court in New York dismissed a breach of contract and securities fraud suit after concluding that its account of the defendants’ asserted wrongdoing was too speculative.

Indeed, the Plaintiff in Iqbal himself, was a Pakistani Muslim working and living in Long Island, who claims he was arrested 2 months after 9/11 and then beaten and tortured. But the court didn't want to hear about it:

Justice Kennedy said Mr. Iqbal’s suit against two officials had not cleared the plausibility bar. All Mr. Iqbal’s complaint plausibly suggested, Justice Kennedy wrote, “is that the nation’s top law enforcement officers, in the aftermath of a devastating terrorist attack, sought to keep suspected terrorists in the most secure conditions available.”

In other words, the Court found the allegation that an innocent person was tortured as "implausible". It has become apparent to everyone, however, that many innocent people were tortured.

The Iqbal decision is - literally - an assault by the Supreme Court on the American system of justice. For it prevents plaintiffs from having their day in court if either:

The judge doesn't want to hear the case; or

The defendant has hidden the evidence of wrongdoing, so that the plaintiff cannot provide the details of defendant's wrongdoing without the use of the formal discovery process which only starts once litigation has commenced

People may ask "the Supreme Court interprets and enforces the American justice system, so how can it gutthat system?

Well, Congress members and the President are supposed to represent the interests of the American people. Have they always done so?

Judges - like people in the White House and Congress - are human beings with political and personal viewpoints. Some stick to the case precedent while others - no matter how high and mighty - abandon it for political or personal reasons. That is the dirty little secret that those who work inside the justice system know.

In rendering the Iqbal decision, the Supreme Court abandoned some of the fundamental principals of justice, leaving a system which only pays lip service to that word.Several Supreme Court justices dissented with the majority's opinion in Iqbal. As Raw Story writes:

Departing Justice David H. Souter sided with the minority in this case, expressing dismay in his dissent and suggesting the decision could “upend,” said the Times, the federal civil litigation system. He argued that complaints should be accepted “no matter how skeptical the court may be,” so long as the accusations are not “sufficiently fantastic to defy reality as we know it.”

“[Claims] about little green men, or the plaintiff’s recent trip to Pluto, or experiences in time travel,” he said, should be the bar for disqualification.

Now, Chris Floyd and Yves Smith point out another worrisome Supreme Court decision:

If the president or one of his subordinates declares someone to be an “enemy combatant” (the 21st century version of “enemy of the state”) he is denied any protection of the law. So any trouble-maker (which means anyone) can be whisked away, incarcerated, tortured, “disappeared,” you name it. Floyd’s commentary:

After hearing passionate arguments from the Obama Administration, the Supreme Court acquiesced to the president’s fervent request and, in a one-line ruling, let stand a lower court decision that declared torture an ordinary, expected consequence of military detention, while introducing a shocking new precedent for all future courts to follow: anyone who is arbitrarily declared a “suspected enemy combatant” by the president or his designated minions is no longer a “person.” They will simply cease to exist as a legal entity. They will have no inherent rights, no human rights, no legal standing whatsoever — save whatever modicum of process the government arbitrarily deigns to grant them from time to time, with its ever-shifting tribunals and show trials.

It is hard to overstate the significance of this horrid decision. The fact that the Supreme Court authorized this land grab says we no longer have an independent judiciary, that the Supreme Court itself is gutting the protections supposedly provided by the legal system. Per Floyd:

In fact, our most august defenders of the Constitution did not have to exert themselves in the slightest to eviscerate not merely 220 years of Constitutional jurisprudence but also centuries of agonizing effort to lift civilization a few inches out of the blood-soaked mire that is our common human legacy. They just had to write a single sentence.

Now Floyd saw this mainly as an issue of the treatment of enemy combatants and Obama hypocrisy about torture, which is bad enough:

The Constitution is clear: no person can be held without due process; no person can be subjected to cruel and unusual punishment. And the U.S. law on torture of any kind is crystal clear: it is forbidden, categorically, even in time of “national emergency.” And the instigation of torture is, under U.S. law, a capital crime. No person can be tortured, at any time, for any reason, and there are no immunities whatsoever for torture offered anywhere in the law.

And yet this is what Barack Obama — who, we are told incessantly, is a super-brilliant Constitutional lawyer — has been arguing in case after case since becoming president: Torturers are immune from prosecution; those who ordered torture are immune from prosecution….let’s be absolutely clear: Barack Obama has taken the freely chosen, public, formal stand — in court — that there is nothing wrong with any of these activities.

Yves here. The implications are FAR worse. Anyone can be stripped, with NO RECOURSE, of all their legal rights on a Presidential say so. Readers in the US no longer have any security under the law.

Roman citizens enjoyed a right to a trial, a right of appeal, and could not be tortured, whipped, or executed except if found guilty of treason, and anyone charged with treason could demand a trial in Rome. We have regressed more than 2000 years with this appalling ruling.

Is America still a nation of laws? Or is it a nation in which judges get to throw out cases soon after filing because the plaintiffs claims go against the judge's belief system or world view and the President can decide that someone is entitled to no legal protection whatsoever?

Friday, December 18, 2009

The Copenhagen Accord is not legally binding and - apparently - does not specify either target emission reductions or monetary contributions of various countries. Here is a copy of the actual Copenhagen Accord (notice that the Appendices for target emissions and monetary contributions are blank).

Climate negotiations in Copenhagen have yielded a sham agreement with no real requirements for any countries. This is not a strong deal or a just one -- it isn't even a real one. It's just repackaging old positions and pretending they're new.

And a representative of the anti-poverty group, World Development Movement said:

This summit has been in complete disarray from start to finish, and now appears to be culminating in a shameful and monumental failure ... The leaders of rich countries have refused to lead and instead sought to bribe and bully developing nations ...

Preface: My entire purpose for writing this essay is to urge that decision-makers do what is best for our planet and not do something which will cause more harm than good. Environmentalists should check my background below before dismissing this out of hand.

When I pointed out a couple of days ago that a group of scientists and much of the popular press warned in the 1970s of an imminent ice age, I didn't realize they had such a prominent member.

Specifically, as New York Times science columnist John Tierney noted in September:

In 1971, long before Dr. Holdren came President Obama’s science adviser, in an essay [titled] “Overpopulation and the Potential for Ecocide,” Dr. Holdren and his co-author, the ecologist Paul Ehrlich, warned of a coming ice age.

They certainly weren’t the only scientists in the 1970s to warn of a coming ice age, but I can’t think of any others who were so creative in their catastrophizing. Although they noted that the greenhouse effect from rising emissions of carbon dioxide emissions could cause future warming of the planet, they concluded from the mid-century cooling trend that the consequences of human activities (like industrial soot, dust from farms, jet exhaust, urbanization and deforestation) were more likely to first cause an ice age. Dr. Holdren and Dr. Ehrlich wrote:

The effects of a new ice age on agriculture and the supportability of large human populations scarcely need elaboration here. Even more dramatic results are possible, however; for instance, a sudden outward slumping in the Antarctic ice cap, induced by added weight, could generate a tidal wave of proportions unprecedented in recorded history.

Shooting Soot into the Upper Atmosphere

And when I wrote that some scientists considered pouring soot over the Arctic in the 1970s to help melt the ice - to prevent an ice age - I didn't realize that soot was still on the table as a way to battle climate change.

Shooting pollution particles into the upper atmosphere to reflect the sun’s rays.

The most common type of man-made "pollution particle" is soot. Indeed, as the American Lung Association points out:

Soot is an old name for particle pollution.

So President Obama's science advisor, Dr. Holdren, is now saying that we might need to use soot to stop runway global warming. (Soot in the upper atmosphere can reflect sunlight and cool temperatures, but soot on the surface of ice helps warm and melt the ice by absorbing sunlight).

And as NASA's Goddard Institute for Space Studies has shown, soot in the upper atmosphere ends up on the surface of ice sheets and glaciers, such as Arctic ice cap:

South Asia is estimated to have the largest industrial soot emissions in the world, and the meteorology in that region readily sweeps pollution into the upper atmosphere where it is easily transported to the North Pole.

I don't know whether Dr. Holdren was one of the scientists recommending using soot to melt the ice cap in the 1970s, but the fact that he would even consider shooting soot into the upper atmosphere now to cool the planet is very troubling.

If scientists had convinced policy-makers to pour soot over the Arctic ice cap in the 1970s, we might have had real problems. If scientists convince them to shoot soot into the upper atmosphere now, we might get the exact same end-game.

First, Do No Harm

I have previously pointed out numerous decisions regarding the environment which have caused more harm than good, such as the government forcing a switch from one type of chemical to a chemical which turned out to be 4,470 times more potent as a greenhouse gas than carbon dioxide. Here's another one. The mongoose was introduced to Hawaii in order to control the rats (which were eating the sugar cane used to make rum). It didn't work out very well - mongeese are daylight-loving creatures while rats are nocturnal - and the mongeese trashed the native species in Hawaii.

My whole point is that we should make sure that our actions do not cause more harm than good.

Note 1: I have an extensive background working to preserve natural areas and reduce urban pollution. Indeed, my environmental resumé is as good as just about anyone's. I studied environmental science at a top university in the early 1980's.

Note 2: I not only do not receive a penny from oil or any other energy, industry or political person or organization of any nature whatsoever (I make a few peanuts from ads on this site, which I do not choose, but are selected without my input by my ad service), I am also wholly and completely against big oil, big coal and big nuclear. As I have repeatedly argued, power should be taken away from the oil giants and decentralized. I have repeatedly argued for microgeneration and for alternative energy. These things are beneficial for a number of reasons - including better health, less corruption of our political systems through decentralization of power, and a boost to our economy - in addition to the environmental benefits they may have.

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